Why didn't the 'smart people' see it coming? Why are there monkeys all over the world running around with their heads cut off? Why are so many so surprised?
Because HP'ers sure aren't.
It was just so FRICKING OBVIOUS.
I'll never understand why so many 'smart' people didn't see it coming.
And to think, this ENTIRE mess, this whole debacle, is because of houses.
Houses took down corporations. Houses destroyed the world economy. Houses ruined millions and millions of lives. Houses are now America's Public Enemy #1. Houses, for a short period of time, when they became lottery tickets and not homes, became evil.
May the stench from housing gambling last for generations.
Houses should be homes. Nothing more.
September 15, 2008
It is amazing, isn't it? 168 year old firms folding. Stock markets crashing. Millions losing their jobs. Economies devastated. Because of houses.
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Two or three years ago all the nitty gritty mechanics of the Housing Debacle weren't clear to me as I'm sure it wasn't to 99% of people.
My sister worked for New Century Mortgage and I could never figure out what the hell she did no matter how she explained it. She would tell give people loans for houses when they had no documented income or assets. It didn't make sense.
Also, people would tell me to buy a house or condo. I would say the housing market is going nuts and this is the worst time in history to buy.
I didn't understand exactly what was happening but I knew something was serioulsy F'd. It was so obvious. Eventually banks would fail, homedebtors would lose their bank's homes back to the banks, and economic disaster would unfold.
Now I know in addition to RE people, investors such as Cramer, traders, banks, mutual funds, people trying to sell a home are not to be trusted. Their predictions are lined with lies and smoke and mirrors to make more money for themselves.
What an exciting day this is turning out to be.
Running out of popcorn over here.
We're a nation obsessed with housing. It's amazing people spend a half mil on a house. It can't produce anything. It doesn't increase in value, adjusted for inflation.
And the houses Americans make are so crummy. 2x4's, sheetrock, vinyl siding, crummy asphalt shingles, with horrible insulation ratings. We're obsessed with putting ourselves in enourmous debt for these things.
I'm convinced we do this in part because the public realm is so awful we need a private place of our own. What a waste this has all been. Think of all the cool public parks, smaller but higher quality housing, commuter railway systems we could have purchased.
The ideology of homeownership enjoys the support of Republicrats and Democans, until now more money can be made from this turnip. Then we turn to a new scheme, that's the genius of America.
Why didn't the 'smart people' see it coming? Why are there monkeys all over the world running around with their heads cut off? Why are so many so surprised?
-----------------------------------
Possible answers.
1. Rich people are stupid.
2. Rich people are corrupt.
FANNIE AND FREDDIE DOWN ONLY 99%. SOME CRASH!!!
DOPES!!!!
one word: optimism. the trend among intellectuals these days is optimism, power of positive thinking. if you've got a negative expectation, you're a pessimist, a downer, a can't-do person.
never mind that it may very well be that you can't do and it would be a bad idea to try doing.
risk aversion looks mighty good these days. call me whatever you want.
Oh look at my pretty house of cards
Oh crap! My house of cards fell apart
How did that happen?
The stench will last for generations, Keith. I guess that it was just too obvious for all the "experts". They couldn't see the foreclosures for the closing statements with all those nice, fat commissions.
I'm exhausted from sending out
"i told you so" emails today.
How is it that we bloggers who were really just interested observers saw it coming when so few others did?
Seriously, some otherwise intelligent folks just could not read the signs.
Perhaps evolution is not just limited to physical design, perhaps it includes having insight and healthy sense of skepticism.
Too bad my wife and I decided not to breed. Who can afford to raise kids?
What Crash?
Sheeesh . . . .
For those who just lost their life savings; How do 1% treasury securities look to you now?
Not just "because of" houses but simply because houses were the last stop of multi-decade speculative craze. To me they are more of a symptom than a cause.
I want utter and complete devastation of every stinking, corrupt, piggy-oinking financial/RE firm that had ANY role in this debacle.
I want CEO/CFO/etc. heads to roll and their blood in the streets...
I HATE these guys!!!!
And yet (barring an outright violent revolution) it will be OUR blood in the streets (as tax payers and hard working savers) as all the CEOs and their ilk already have their money in Swiss bank accounts and will simply leave the country if need be.
Case in point "poster boy"....Mozillo.
Bushco's "ownership society" is now in full bloom.
I want utter and complete devastation of every stinking, corrupt, piggy-oinking financial/RE firm that had ANY role in this debacle.
I want CEO/CFO/etc. heads to roll and their blood in the streets...
I HATE these guys!!!!
And yet (barring an outright violent revolution) it will be OUR blood in the streets (as tax payers and hard working savers) as all the CEOs and their ilk already have their money in Swiss bank accounts and will simply leave the country if need be.
Case in point "poster boy"....Mozillo.
Bushco's "ownership society" is now in full bloom.
Any yet just last week alone Bob Toll took exercised options and cashed out almost 40 million dollars from the publicly traded company that he is the CEO of.
Jersey Girl
How many square feet is your house?
Guess what my house appraised for?
My next door neighbor STILL brags about what her house at the shore appraised for.
BE GONE, before somebody drops a house on you!
http://www.youtube.com/watch?v=oz50_MWWKwg
A house, a house, my kingdom for a house...
Hubris - Excessive pride/arrogance
We have seen so much hubris during this housing crisis from all parties involved, at a level never seen before in our history.
As a result of this hubris, the problem now facing us is much deeper and lengthly, and now it's cascading rapidly into other sectors of the economy. It can no longer be hidden or explained away as a "little dip" by the media talking heads.
The service industry remains strong, but the service industry is not enough to sustain our economy - we also need creators and thinkers in other areas of our economy.
However, our greedy leaders decided it makes more sense to outsource all the jobs that matter most to the long-term stability and growth of this country, all because they wanted to line there pockets with lots more cash.
Well, the value of the dollar is pretty much finished now, especially since Paulson/Bernanke decided to (once again) make the hard working tax-payer responsible for all the others who stole/cheated, or gambled and lost.
For those of you dependent on tax-payer money for your income, I'd also be worried. Where will your money come from when unemployment starts hitting 8%? 10%?
No one is immune, the problem just takes time to work it's way through these sectors - in fact, it's already beginning to happen at the lower levels.
We're just now seeing beyond the tip of the ice-berg, and the really scary stuff is just over the horizon.
What to do though? Realizing the problem (as we do on this blog) is a good start, getting upset/angry/fed-up is a good start also since it encourages real action. However, the only way we can set things right in this country is to force change at the top. We'll need to think really hard now who we need running this country - someone without just the elite interest in mind.
Is this still possible?
Do such a person, and adminsitrative staff, actually exist?
Do we really have such a candidate now to vote for? .... I don't believe so. Positive actions - not talk - are what matter from true leaders, and I haven't seen anything of that sort yet which benefits the country as a whole for a long time, especially from both of these blow-hards running for the position - and let's not even discuss those running for vice-president.
Let's stop judging candidates by how they dress and look, and what comes out of their mouths (i.e. if it sounds good for our immediate family, they are the right candidate for us)
We need to think collectively now, and stop focusing just on our own immediate families/interests.
If we don't, it's like saying goodbye to the world we once knew and ushering in 3rd-world conditions - and this especially applies to our future generations.
Fear propaganda? No ... hard, cold reality.
Who will you be voting for, and are they really concerned about the NATIONS interests?
You see the picture clearly.
Don't let anyone sway you to think otherwise.
vanilla ice said...
Two or three years ago all the nitty gritty mechanics of the Housing Debacle weren't clear to me as I'm sure it wasn't to 99% of people.
My sister worked for New Century Mortgage and I could never figure out what the hell she did no matter how she explained it. She would tell give people loans for houses when they had no documented income or assets. It didn't make sense.
Also, people would tell me to buy a house or condo. I would say the housing market is going nuts and this is the worst time in history to buy.
I didn't understand exactly what was happening but I knew something was serioulsy F'd. It was so obvious. Eventually banks would fail, homedebtors would lose their bank's homes back to the banks, and economic disaster would unfold.
Now I know in addition to RE people, investors such as Cramer, traders, banks, mutual funds, people trying to sell a home are not to be trusted. Their predictions are lined with lies and smoke and mirrors to make more money for themselves
It aint just a river in Egypt folks.
Denial is one of the most powerful human instincts. From the people on Easter Island destroying their own livelihood to people believing in Disney-like portrayals of reality where people get stuff for nothing (while everyone else in the world starves) to plain old mortality and our total lack of philosophy to handle it.
Ask a smoker, junkie, junk food addict or anybody else with a compulsive disorder. You deny the damage its doing to go down the path of least effort.
i'll tell you what's so obvious, how much you hate amerika!
The myth was that if you don't own (or pay a mortgage on) a home, you're not a good provider - that's absolutely hogwash.
My parents scraped and saved like I'm sure many people's parents had, and rented for several years
before deciding on putting a downpayment on a house.
They had no interest to be "moving up" all the time, the priority was to raise a family and enjoy the simpler things in life - and they had a very good (realitively) stress-free life.
Everything has changed now, people are more impulsive/greedy/stressed-out and wanting "it all" now - only to have it all taken away, plus more - and they really didn't enjoy the place or spend much time there anyways.
There is too much housing inventory, and it will have no choice but to keep growing as more people lose their jobs, and eventually walk away from their over-inflated mortgage payments.
The quality of homes built now, as you clearly stated, are garbage - yet the price of these over-priced shacks went up beyond reasoning.
Now it's all falling back to what it's actually worth, which won't be much after we've worked through all this financial rot.
vanilla ice said...
We're a nation obsessed with housing. It's amazing people spend a half mil on a house. It can't produce anything. It doesn't increase in value, adjusted for inflation.
And the houses Americans make are so crummy. 2x4's, sheetrock, vinyl siding, crummy asphalt shingles, with horrible insulation ratings. We're obsessed with putting ourselves in enourmous debt for these things.
I'm convinced we do this in part because the public realm is so awful we need a private place of our own. What a waste this has all been. Think of all the cool public parks, smaller but higher quality housing, commuter railway systems we could have purchased.
Brings new meaning to the saying "safe as houses" does it not?
Seriously Keith you just CAN'T shut this place down after the election. Things are just starting to get good! Wait until you see this election's shenanigans and then whatch what the new batch of idiots in power do to 'fix' things. It will be literally unprecidented. Don't miss out on all the fun.
The smart people did see it. Oh wait.... that was the 'smart' people.
I've got a box each of kettle corn and movie theater butter.
I'm actually surprised. The market always seems to move in the opposite direction of what one would think the news would indicate. Maybe fundamentals are finally catching up.
I can hear a collective
OHHHHH!!!!..............AHHHHHHH!!!!
from us like kids watching fireworks.
Not absolutely sure about this but on the whole, I think H.P.er's have something else mixed in with their smarts - a sense of humility and grounding. Could be wrong, but I doubt that anyone who regularly reads this blog and contributes is of the opinion that his/her sh*t does not stink.
Smug Bastard
a few years ago, had the unfortunate opportunity of reviewing mortgage files for a fairly large international banking company.
in the northwest suburbs of chicago is an iron mountain storage facility jam packed with bankers boxes full of mortgage documents. spent a good 3 months flipping thru them in utter amazement as i saw how much money was being lent (as a first mortgage and as heloc) on piece of sh1t homes all over the country(photos, hud 1's, and other loan docs were in the files - very few had financial statements).
500k as a second on less than 1k square feet! thought it was an anomoly at first, then saw similar homes on the doctor housing bubble blog with the same rediculous prices (google real homes of genius).
if upper management didn't know what was going on, the people on the front lines sure as sh1t did!
no one was going to stop the gravy train. they couldn't afford to!
If you want to know the real story as to how we got into this mess, download the transcript for the recent episode of This American Life, "The Giant Pool of Money."
http://www.thisamericanlife.org/extras/radio/355_transcript.pdf
I'm serious... READ THIS IN ITS ENTIRETY. (Or subscribe to the This American Life podcast and select this episode.)
It will tell you EVERYTHING you need to know. Not surprisingly, this was the most-requested podcast in the show's history. I even played the podcast for my friend from Canada, and she was riveted.
HEY DIVETMENT!
It is funny (well perhaps not funny but more ironic) that you would ask the question "how do 1% treasury secutities look now?". I just looked at my 401K, not really all that big but I have had an aversion to risk for the last two years. We have about 35 funds to choose from in our 104K plan and I put all my money into the "cash" fund. It is some kind of money market account mostly invested in treasuries. Well, out of the 35 funds, 33 of them are down YTD! Some of them as much as 35%. most down 5% to 15%. The money market fund was up 1.5%.
I remember saying to a colleague that was investing in one of the emerging market funds, about a year ago, "after losing 20% or so, a 2% gain does not look so bad". Of course, he laughed. He is not laughing now. In fact, everyong is crying about how much money that have lost in the various funds.
"Revenge is a dish that is best served cold"
-Ancient Klingon Saying
Thanks Keith for keeping us so well informed.
I live in New Jersey and prices are as stubborn as the sellers. I'm thinking this latest series of events should help push things in our favor with respect to home prices (but certainly not the lives of many decent people).
My wife is running out of patience I hope our moment arrives soon.
"Where's your Moses NOW?"-Edward G. Robinson "The Ten Commandments".
Important message: Rent! Rent! Rent! House prices have a long way down especially on the East Coast!
FYI: Housing prices in the NY metro area are still way up! In areas where the median household income is around $75K, there are average run-of-the-mill houses that sell for $600K.
My Aunt purchased a 2.5 million dollar home 6 years ago. She and her husband just puchased another McMansion in Windemere Florida. They have really big homes, really big cars, a lot of stuff..They own their own computer programing business....But they want more and more....
This is just one of many many stories..
On my aunt's street alone all the beautiful middle class homes were torn down with McMansions all looking very similar to eachother being built. It's epidemic.
You suckers just don't get it. Do you think the elite and the rich are hurting? You think they could give a 5h*t about Indy Mac, Freddie Mac, or Bernie Mac? They have hard assets, while you morons have your Four Oh Won Kays ( whatever the fuck that is), Roth Eye-Ra's, and your debts. You and your kind are going to be "culled." You will never get it.
This collapse is not a result of housing. This is a banking crisis that created the housing mess.
The system has been doomed for years and years.
Keith, there's a phrase for what you're saying here. I can't remember how it goes, but it's something like, if these people ever figured out how flawed their line of work would become before the sh*t hit the fan, they would have been out of a job sooner.
I would recommand to read a book : American Theocracy from Kevin Phillips and especially section III Borrowed prosperity.
I bougth it in 2006 in USA ... it describe the american debt problem and asociated systemic risk pretty well. The problem is that media does not sort the informations and educate people with this kind of informations.
I am still wondering if capitalist system can survive in a non growing market (you always need more cash to reimburse more debt unless you meet really higth inflation ...).
Come on Keith. Housing didn't take down the financial markets. Human greed did - just as it always has and always will. Housing was just the vehicle used...
I live in New Jersey and prices are as stubborn as the sellers.
I can never understand why people choose to live in states that have the highest taxes in the country, even when they're far from rich. Thanks buddy, no need to explain...just keep paying taxes to the nose.
Not because of houses - because of GREED
Hang in there my friends.This mess will be over soon.Be thankful you have a family and a job.When is the last time you told your neighbor hello? Get back to basics and befriend your fellow americans in the time of crisis.
The service industry remains strong, but the service industry is not enough to sustain our economy - we also need creators and thinkers in other areas of our economy.
The problem there is the Pelosi/Reid/Obama faction wants to tax those creators and thinkers into oblivion. When they dupe the dumb sheeple by saying "You're middle class so you'll get a tax cut," they leave out that the so-called rich who are going to get gouged just happen to sign the middle class's paychecks.
As taxes in the upper brackets and business/dividend taxes go up, you'll see more and more of America's creators and thinkers moving to Dubai corporations and other legal tax shelters, setting up their income schemes to minimize US taxes, and sending more and more jobs overseas with them.
If these dopes would pull their heads out of their asses and realize that raising taxes on business and the "rich" actually REDUCES tax revenues by discouraging productive effort and reducing payroll/wage tax revenue, we could explode our economy.
Really, it's not brain surgery. If a company has to pay an extra $100k in taxes each year, that's $100k less in salaries and benefits for the workers. You don't really think they'll take it out of their cut, do you? Are people THAT stupid and gullible?
Then again, the dems *DO* know this, but instead they choose to play class warfare to keep the dumb sheeple voting for them and keep their cozy jobs and perks. They don't care that higher taxes on the "rich" will destroy jobs as long as the working class continues to vote for them.
Unless and until we have a FairTax or some similar type of flat consumption tax system, we're f*cked and it will only continue to get worse.
Back in 2005 when we sold our house we could see the hand writing on the wall. We were voices crying in the wind .I to this day can not believe what kind of world I'm living in.To me it's pretty scary. What a mess we in and yes all for a house just not worth it and of this .
Check out this video; watch til the end.
Who are the bankers in the shower; and who is smart enough to wear the cleats. . . . Mozillo? Naw . . . . . .
Soprano fans will love this!
http://theseuncertaintimes.blogspot.com/
the graveyards of unsold homes were meant for the illegal immigrant hordes.
The mass amnesty plan was foiled leaving all those homes unsold.
But the structures remain a potential to unleash the flood gates with a tsunami of illegals and illegal treasonous corporate/govt malfeasance.
The trap is set; it is only a matter of time. We are all doomed.
Greed.
it was because of greed, houses were just the vehicle for greed.
last time it was the "dot com" and before that the PC boom.
the bubbles kept getting bigger and bigger.
For the American Corporations to take the easy greedy way out and out-source and open industry in other countries was the problem .
I have said it many times that you can't have a World labor force determining the price of things.
Condos for everyone .
Sorry Keith, hate to blow your bubble, but this IS NOT because of houses. It is because of omnipresent GREED of Americans. It is because of houses, cars, credit cards, hookers, drugs, booze, wars, up to hedgefonds and widespread stupidness.
It is because of complete failure of your administrations since at least 15 years. It is because they printed cheap money so that the risk of losing it seemed to vanish. So they created a heavily leveraged word from hedgefonds to banks and insurance companies down to home "owners".
This crisis is no subprimecrisis. It is no housing crisis. It is because of egocentric I want to HAVE EVERYTHING for ME right NOW!!! without being able to pay for it or to even to care about that. It is because America (including citizens, businesses and government) was spending far more than its economy was able to support.
The thing I'm most astonished about is that till now you were able to sell all the shitty waste that your fiat money economy created all over the world. But now it seems that you got so GREEDY that you kept the toxic waste in your own hands.
GAME OVER!!!
GRRMANY
"Seriously Keith you just CAN'T shut this place down after the election. Things are just starting to get good! Wait until you see this election's shenanigans and then whatch what the new batch of idiots in power do to 'fix' things. It will be literally unprecidented. Don't miss out on all the fun."
I second that. Just as the tsunami comes ashore you want to shut the place down? It's going to be hilarious to see all the finger pointing during the election and the next set of idiots trying to fix this mess.
You're forgetting the cost of the MIC that in addition to housing.
I actually saw it coming ten years ago, and have been warning everyone around me, but no one was listening.
I have an MBA in Finance and a lot of years of mentoring from some very astute investors, and even though my friends and co-workers, who know nothing about international finance and politics, looked at me with disdain when they learned that a 42 year old with a family was still renting. What a loser! They offered me advise to build equity. I am the only one with true equity as surely homes will lose 90% of their value over the next five years.
I didn't just advise friends, I went on record, via emails and town hall meetings at my company, when three years ago I alerted senior level executives of the financial danger and asked them to make available a 100% Treasury Fund to our 401K options in order to save our retirement money.
The response was, blah,blah, blah, what does a middle level manager know of these complicated instruments, and of course no treasury fund has been made available.
Most employees have their money invested in equities or have made investments with what they think is safe, the well known stable value fund, most likely you have one at your company.
AIG and other insurers are most likely the primary contract holders of that stable value fund that guarantees a share price of $1.
AIG is folding, so I am willing to bet that most 401K plans will be worthless within three months.
A word of advise to my passionate young coworkers, you better be able to time the market, otherwise you are just donating your hard earned money.
Anon September 16, 2008 9:08 PM:
You started off pretty well, but then you got into "probably" and "willing to bet". That's too bad.
I doubt that your management actually said, "blah blah blah, what does a middle-level manager know..." to you, especially in a town hall format, but what the heck, it was a good story.
P.S. - Only 20% of my net worth is home equity, and the house is 10 years away from being paid off. See, I have the house AND the investments. Your friends and family are right about a 42-year old renting family man. You had an excuse for the last 10 years - what about the 14 before that?
The reason is very simple. Henry Hazlitt said you cannot get someone to see something that is contrary to their job security.
So much of our economy has become (used to be) finance, insurance or real estate that most highly paid people were working against their immediate interests if they thought.
These sectors were meant to AID production and they became the only "production" happening.
Making things cannot be over rated. In fact it is an economy. Period.
I am in Thailand after a 15 year absence. There are about fifty miles of gleaming factories outside Bangkok now making everything. The change in the city is hard for me to believe. The filthy third world city is now immaculate with a stunning transport system.
to the anonymous that said"...your friends are right..." after all those years , I have 3.1 million dollars in my self-directed IRA and I have very good investments spread around the globe.
I don't really give a rats ass if the market crashes 100% tomorrow. It is all about cash flow.
PS Company executives did say blah, blah, blah. This is a real story.
No, houses came in the middle of the development of this mess; it goes back further.We could discuss fiat currency vs gold back, but not now.
First, development of derivatives and securitization which begin to replace older methods of producing income.
Second, loosening and spread of credit 'opportunities' throughout culture. Read that debt opportunities.
Third, increased leveraging across the board.Read that pyramid scheme.
Forth, lowering of interest rates..
Fifth, NOW the housing/ credit bubble, complete with misleading appraisals....houses were never worth their worth, so we are just working our way back to the truth..
6th, deceiving the world, one and all, with misconstrued, misleading sliced and diced alphabets of shares of this wonderful soup.Hence pressure right back to make things right from foreign owners of said shares.
7th, and not unimportantly, the continual drumbeat throughout our culture of advertising which told us who we were, with and without credit, with and without things..
We bought the fairy tale version.
No one wants to see themselves as basically, to borrow a phrase from the Great Depression, a working stiff.
So we are working our way back to the historical mean.Bummer. We're ordinary....
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